HMO LICENSING: A GUIDE FOR LANDLORDS

The Housing Act 2004 has introduced changes to the regulation of HMOs through the introduction of licensing schemes. The introduction of HMO licensing aims to improve controls of HMOs and raise standards within some of the highest risk properties which house many vulnerable people. Licensing aims to ensure HMOs are adequately managed and risks to occupants reduced.

What is a HMO?

The Housing Act 2004 redefines a HMO as a building or part of a building (i.e. flat) which:

Is occupied by persons not forming a single household and;

Two or more households occupy and share one or more basic amenities (or lack such amenities);

Is occupied by more than one household and is a converted building not entirely comprising of self-contained flats;

Comprises entirely of self-contained flats and the conversion does not comply with the Building Regulations 1991 and less than 2/3 of the flats are owner occupied;

The HMO is occupied as the only or main residence;

Rents are payable or other consideration is provided in respect of at least 1 of those occupying the HMO.

Are any buildings exempt?

Yes – the following are exempt from the HMO definition:

Building occupied by only two people who do not form a single household;

Buildings managed by educational establishments, Local Housing Authorities, Registered Social Landlords, Police, Fire, Health Authority or regulated by other legislation such as residential care homes etc;

Buildings occupied by religious communities;

Buildings predominantly owner occupied, including residential landlords where the owner occupier (and family members) occupies the building (or flat) with no more than 2 other persons;

Buildings converted into self-contained flats, where the conversion meets 1991 Building Regulations. Also, other self-contained flat conversions where there is no sharing of bathroom facilities.

What is a single household?

A single household includes members of the same family either by blood, marriage or other recognised means such as adoption or fostering. As an example, four friends sharing a student dwelling will be classed as four individual households and therefore a HMO.

Which HMOs are licensable?

Not all HMOs are to be subject to licensing. The Housing Act 2004 has introduced 3 licensing schemes that will regulate different types of HMOs.

Mandatory Licensing: This scheme applies to all HMOs comprising of 3 or more storeys and occupied by 5 or more persons comprising of 2 or more households. All local authorities must introduce this type of licensing scheme.

Additional Licensing: This scheme may be applied to smaller HMOs that fall outside the scope of Mandatory Licensing. Local authorities have discretion to introduce this type of licensing scheme where it is considered as a necessary means of improving conditions in smaller HMOs.

Selective Licensing: This scheme may be applied to any private rented property/housing within a designated area that is affected by low demand and/or anti-social behaviour. Local authorities have discretion to introduce this type of scheme where it is considered necessary.

SOUTHAMPTON CITY COUNCIL HAS INTRODUCED A MANDATORY LICENSING SCHEME. THE MANDATORY SCHEME CAME INTO FORCE ON 6TH APRIL 2006.

Are any HMOs exempt from Licensing?

Yes – HMOs exempt from mandatory licensing include:

HMOs which are less than 3 storey and/or provide accommodation for less than 5 people;

Buildings converted into self-contained flats which do not meet the 1991 building regulations and less than 2/3 are owner occupied.

When will a landlord need to apply for a licence?

In order to apply for a licence you must contact Southampton City Council, Private Sector Housing team to request an application as soon as possible.

From April 6th, the Council will be seeking to encourage landlords to ensure their HMOs are licensed. Enforcement action will be considered by the Council in respect of HMOs where the person in control has not made a proper application for a licence by 3rd July 2006.

In order to grant a licence the Council must be satisfied that:

The dwelling is reasonably suitable for occupation by no more than the permitted maximum number of households or persons;

The licence holder is a fit and proper person;

There are adequate management arrangements for the dwelling.

What are Temporary Exemption Notices?

Temporary Exemption Notices (TEN) are notices that temporarily exempt the dwelling from requiring a licence. These can be issued by the Council if they are satisfied that the person who is to be the licence holder, proposes to take steps to ensure the property no longer requires a licence within a short period of time. Examples of situations that may warrant a TEN are:

Tenants have given notice that they are leaving within the next 3 months, which will bring the number of occupants down to less than 5.

Planning permission has been granted and work is underway to convert the property into self-contained units, where the building is already vacant.

Planning permission has been granted and work is underway to convert the property into self-contained units, where tenants are still in residence, but the work is due to complete within 3 months.

Work is underway to convert the basement or attic, in a 3 storey building, from living accommodation into storage to which the tenants have no access, and where work will complete within 3 months.

Please note that giving notice to quit to any tenants, specifically in order to reduce the numbers below 5, at any time after 6th April 2006, is an offence. Straightforward sale of the property to another person is unlikely to warrant a TEN, as the property will remain a licensable HMO throughout.

If considered appropriate, a TEN will be issued for a period of 3 months and in this time, it will be the duty of the proposed licence holder to ensure that the property no longer requires a licence. In exceptional circumstances, a second TEN may be served providing a further 3 months’ exemption. A maximum of 2 TENs may be served in total and, following the expiry of these notices, if the HMO still falls within the licensable criteria, an application for a licence must be made.

What is a fit and proper person?

In deciding if an applicant is a fit and proper person, the Council will make enquiries relating to:

Any discrimination practised in relation to sex, colour, race, ethnicity or disability;

Any contraventions of Housing or Landlord and Tenant legislation;

Failure to comply with Management Regulations in respect of HMOs.

Other relevant matters

What happens if the applicant is not a fit and proper person?

If the proposed licence holder is not deemed to be a fit and proper person, another person must be proposed as the licence holder. This person must be the most suitable person to hold the licence.

The most suitable person must also qualify to be a fit and proper person, that is to say, they have not contravened any of the above pieces of legislation.

Consideration will also be given to the following in each case:

Does any person involved in the management of the property have a sufficient level of competence to do so?

Are there proposed management structures and funding arrangements in place to manage and maintain the property?

How long does a licence last?

If a licence is granted by the City Council it cannot last longer than 5 years. It will be at the discretion of the Council to determine the length of a licence granted to each HMO.

A licence may be issued for a reduced period for a number of reasons, for example:

Previous Housing Act 1985 notice(s) served, e.g. s189/190, where they indicate cumulative neglect in any of the landlord’s properties

Previous management notice(s) under s372 Housing Act 1985, where this shows serious neglect affecting the tenants’ welfare in any of the landlord’s properties

Housing Act 2004, Part 1 notices served, where there are Category 1 hazards that indicate cumulative neglect in any of the landlord’s properties

Non-volunteered premises (i.e. if we have to find properties that need licensing and chase them to make a licence application)

Serious misrepresentations or errors discovered, e.g. after site visit to check application details, in relation to any of the landlord’s properties

These issues may impact on the licence period issued for only one property or for a landlord’s whole portfolio, depending on the number and seriousness of the issues identified.

The licence fee will remain at the same level, regardless of the length of licence that is issued. This is because all of the same processes and checks need to be followed in order to issue the licence, whether it is for 2 years or 5 years.

Are there conditions attached to a licence?

Minimum mandatory conditions to be included in a licence are:

To provide annual gas safety certificates;

To ensure safety of furniture and electrical appliances;

To install and maintain smoke alarms;

To provide tenants with a written statement of terms.

The local authority may also attach additional conditions to licences relating to management, use and occupation, condition and contents of the property, etc.

Such conditions may include:

Restrictions of use and occupation of parts of the property;

Steps to be taken to reduce anti-social behaviour;

Timescales and works to comply with HMO standards;

Attendance at training courses in relation to applicable codes of practice etc.

Can a licence be changed?

Yes – Under the following circumstances the terms set out in a licence may be varied:

With agreement of the licence holder;

Due to a change in circumstances since the licence was granted.

A ‘change in circumstance’ would include:

Change to the property, perhaps extending it to create more units of accommodation.

Change in legislation since the licence was granted.

Change of manager, where the licence holder remains the same.

What happens to those who operate an unlicensed HMO?

There are several offences in relation to licensing of HMOs that carry fines on conviction.

If a HMO is operated without a licence, the person having control of, or person managing the dwelling is liable, on conviction for a maximum fine of £20,000.

Breaching licence conditions is an offence and on conviction may lead to a maximum fine of £5,000 per condition breached, unless the breach is of overcrowding condition, which is subject to a maximum fine of up to £20,000. For example, if the licence stipulates the dwelling is to be occupied by no more than 7 people, but the property is found to be housing 8 people, this would be a breach of the conditions. Failure to carry out works specified by the council in the licence would also constitute breach of conditions.

Management Orders

If a property that should be licensed is not licensed, the Council must, in certain circumstances, make an Interim Management Order. This Order will allow the Council to manage the property and collect rent for the property. Rent collected for the property will be used to cover costs of managing the property and to carry out any necessary works. Examples of these circumstances are:

Where there appears to be no reasonable prospect of the property being licensed in the near future;

Where there is a risk to the health safety or welfare of occupants or persons in the vicinity;

When a licence has been revoked.

There are also circumstances in which the council has the power to make an interim management order, by applying to the Residential Property Tribunal, but these circumstances are not linked to mandatory HMO licensing.

Additionally, tenants residing in an unlicensed HMO cannot be issued with a Section 21 ‘notice seeking possession’ under the Housing Act 1988 to evict them from the property. This is an offence and landlords may be prosecuted in such cases.

Rent Repayment Orders

An application may be made to the Residential Property Tribunal for a Rent Repayment Order if a landlord has committed the offence of operating a licensable HMO without a licence. If this is granted, the property owner/manager receiving rent payment has to repay the amount received during the time in which the HMO has been operating without a licence, up to a maximum of 12 months. The council may make this application where rent has been paid through Housing Benefit, but it is also possible for tenants to apply for a Rent Repayment Order to recover rent paid over the same period of time.

How much does a licence cost?

The basic fee applicable to mandatory licensable HMOs with 5 occupants is £550.

This fee will increase depending on additional units of accommodation (i.e. £25 per unit), and any additional services required by officers to process the application. Each application will be charged on a specific case basis. For example, for an HMO with 8 units of accommodation, the basic fee will be £625. If the council is asked to produce plans for the landlord, there will be an additional fee of £100, making a total of £725.

The applicable fees may also be reduced as a result of the following circumstances:

£30.00 reduction if block applications are made on the same day, by portfolio landlords;

£40.00 reduction if the proposed licence holder and any manager is a member of a Council recognised landlord or letting agent association;

£40.00 reduction if the property to which the licence applies is part of a Council recognised accreditation scheme.

REGISTERED HMOs – IMPORTANT INFORMATION

Properties currently registered under the City wide HMO registration scheme and which meet the criteria for mandatory HMO licensing are exempt from licensing fees and will be transferred straight into licensing. Therefore, if you have a registered HMO, that has 3 or more storeys and 5 or more occupants, you do not need to make a licence application at this stage.

ADDITIONAL INFORMATION

For additional information on licensing in Southampton or to request a licensing application form, contact the Private Sector Housing Team at Southampton City Council on telephone number 023 8083 2606.

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